The Correlates of Rentier Returns in OECD Countries

This paper examines the correlates of rentier returns – returns to the ownership of financial assets – in a sample of OECD countries between 1960 and 2000. The authors develop a simple bargaining model among three classes – industrial capitalists, rentiers and workers – and show that rentier income returns increase when domestic and foreign real interest rates rise, costs of capital mobility fall, and the power of labor declines. Using an unbalanced panel dataset, the paper also econometrically investigates the impacts of proxies for these variables on rentier incomes. The authors find that interest rate liberalization, reductions in the unionization rate of labor, and increased returns from foreign financial investments increase rentier returns. These results provide support both for the simple model and for common Post-Keynesian and Marxian stories of the impact of financialization and neo-liberal policy changes on income shares.